The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A) today announced its second quarter 2014 results, which included continued strong portfolio credit quality and widening net effective spread. Farmer Mac's second quarter 2014 core earnings, a non-GAAP measure, were $23.2 million ($2.05 per diluted common share), compared to $16.5 million ($1.48 per diluted common share) in second quarter 2013 and $11.0 million ($0.97 per diluted common share) in first quarter 2014.

The recognition of an $11.6 million tax benefit related to a cash management initiative established in second quarter 2014 was a significant contributor to the increase in core earnings this quarter. Other key drivers of this increase included releases of allowance for losses primarily related to a reduction in exposure to ethanol loans, widening of net effective spread, and net growth in Farm & Ranch loans.

During second quarter 2014, Farmer Mac continued to strengthen its capital position through the issuance of $75.0 million of fixed-to-floating rate perpetual preferred stock, bringing Farmer Mac's total preferred stock issuances for 2014 to $150.0 million.

Farmer Mac's net income attributable to common stockholders for second quarter 2014 was $20.2 million ($1.78 per diluted common share), compared to $27.7 million ($2.48 per diluted common share) for the same period in 2013. The decrease compared to the previous year quarter was mostly attributable to the effects of unrealized fair value changes on financial derivatives and hedged assets, which was a $3.1 million after-tax loss in second quarter 2014, compared to a $11.0 million after-tax gain in second quarter 2013.

Also contributing to the decrease were smaller gains on sales of investment securities of $2.9 million (offset by capital loss carryforwards), an increase in preferred stock dividends of $1.4 million, increases in operating expenses of $0.6 million after-tax, and smaller gains on sales of REO of $0.6 million after-tax.

The decrease was offset in part by federal income tax benefits of $11.6 million (related to Farmer Mac's cash management and liquidity initiative established in second quarter 2014) attributable to utilization of capital loss carryforwards that previously had a full valuation allowance against them and $1.2 million after-tax in releases from the allowance for losses.

Farmer Mac recognized this tax benefit through a reduction in the valuation allowance for its deferred tax assets because it now believes it will realize deferred tax benefits related to capital loss carryforwards.